When I actually asked venture capitalists about investing in AI startups, Businesses are experimenting wildly, but they'll tell you it's too slow. Embed AI solutions into their existing business processes..
But there are some exceptions. One of them appears to be a niche known as AI sales representatives, or AI SDRs. They use large-scale language models (LLMs) and audio technology to create personalized outreach emails and make automated calls to potential customers.
“In some markets, five to 10 companies have achieved success in a short period of time,” Shardul Shah, a partner at Index Ventures, said of the AI SDR boom.
Although it's not unusual for multiple startups to target the same problem. All of them rarely experience rapid growth. But that's clearly the case for startups that automate sales teams, investors say.
“When someone studies (these startups) individually, they say, 'Wow! It's a fantastic product-market fit,' says Shah. “When all 10 of them have amazing product-market fit, it's hard to answer, 'How does that work?'
The Index has not yet invested in these companies that are less than a year old. The whole genre is on fire and users are using them, but because it's too early to know if their progress will continue in the long run or if they'll be abandoned like other AI pilot projects. Don't prove more effective than interpersonal outreach.
Small businesses love AI sales LLMs.
Founder Arjun Pillai; DocketA startup that creates AI sales engineers, we strongly believe that AI SDR adoption is high because small and medium businesses can easily test these tools. Before the Docket; Pillai is the Chief Data Officer at ZoomInfo, a sales lead generation platform.
“In the last two years, the response rate on cold emails has dropped by at least 50%,” Pillai said. “Now there are so many companies that can raise this rate that everyone is willing to try their service.”
The most popular AI SDR startups include Regie.ai; AiSDR, and Artisan 11x.aiBut the current official ZoomInfo also released. Copy it It competes with other virtual sales agent startups.
While these companies are experiencing rapid revenue growth, it's unclear whether they're actually helping businesses sell more effectively.
According to Tomasz Tunguz, founder of Theory Ventures, a chief revenue officer at a publicly traded company, the AI SDR generated a significant amount of leads over a nine-month period, but did not lead to actual sales.
“That doesn't mean AI doesn't work. Many of us do not (yet) know how to use AI,” Tunguz said. He spoke on stage at the SaaStr conference. In September
Will the incumbents crush them?
Chris Farmer, partner and CEO at venture firm SignalFire, believes the application of AI in sales and marketing represents a huge opportunity. But if you don't get different data, Salesforce, It risks being overtaken by existing AI SDR startups like HubSpot and ZoomInfo. The main products of those companies are those who store their customers' data. So if they offer bots that allow their customers to access their own data. Those bots will be more efficient.
Another venture capitalist who has watched but not invested in this market said her firm had looked at several AI SDR startups, all of which had $1 million in ARR in one year. The start-up's impressive growth is compelling; But like Farmer, She said she worries that established competitors will eventually offer their solutions as a free feature.
Jasper, a copywriting startup with an eventual valuation of $1.5 billion, had to run into momentum. 30% of employees are laid off. After introducing ChatGPT, It serves as a cautionary tale for some investors.
Investors are not surprised by the rapid adoption of AI SDRs. They suspect adoption is sticky.
Update: This story was originally published on August 22 and was updated on December 26 with comments from Tomasz Tunguz.